The Growth Of Prime Mortgage Delinquencies Is Actually Slowing

Despite government attempts to aid home owners in trouble with
mortgages, the share of mortgages that are seriously
delinquent—with payments over due by 60 days or more—is still
growing. Serious delinquencies grew by nearly 9%, and now
stands at 5% of all mortgages.

The good news is this represents a dramatic slowdown in the
growth of serious delinquencies. In the fourth quarter of 2008,
serious delinquencies jumped from 3.54 to 4.60, a 30% increase
from the previous quarter.

Overall the percentage of mortgages that are current and
performing remained steady, at around 90 percent—just about where
it was in the last quarter of 2008. Much of this is because early
stage delinquencies shrunk. But don’t get too excited about that,
since the contraction is most likely driven by seasonal effects
and probably isn’t sustainable.

The most troubling news, as we mentioned this morning, was the
continued risie of delinquent of prime loans. Serious
delinquencies of prime mortgages climbed by more than 20 percent
from the prior quarter to 2.9 percent of prime mortgages. The
year over year data makes this look absolutely brutal, showing a
doubling of serious delinqencies.

But here too it looks like the growth is slowing down. The fourth
quarter of 2008 saw a jump from 1.67 to 2.40, an increase of
nearly 44 percent. In short, the delinquencies are still rising
but not as fast as they were at the end of last year.

The numbers that really had us scratching our head was the
contraction of the number of seriously delinquent subprime loans.
According to the government statistics, there were 3.7% fewer
seriously delinquent subprime loans in the first quarter of 2009
than in the fourth quarter of 2008. So does that mean that
subprime borrowers are paying off their loans in greater numbers?
No. What seems to be happening is that the overall number of
subprime loans has shrunk, probably because of foreclosures. But
of those that are still outstanding, seriously delinquencies
continued to grow, albeit of the much slower rate of 1.5 percent.